Whatever happened to liberation theology? Back in the 70s, the big idea was that salvation was unavoidably political. Just as Moses led his people out of slavery, so it was the task of the church to help lead people out of poverty. Inspired by the work of Latin American base communities in the Roman Catholic church, theology became a tool to give the poorest a rallying point for resistance to political oppression, not least in the area of land reform.

But in the early 90s the Vatican became increasingly nervous of priests behaving as revolutionaries. They shut down the base communities and appointed a succession of conservative bishops in places like Brazil to stamp out the creeping influence of Marxism – an ideology that was loathed by the Polish pope John Paul II. From here on in, liberation theology was something that would only exist in the textbooks of trendy European intellectuals. That, at least, is the popular wisdom. But it's not the full picture. Liberation theology in South America may no longer be influential in the mainstream churches, but it remains a potent force among the poor themselves.

Driving north out of Brasilia, one appreciates the problems Brazil continues to have with land distribution. For over an hour one passes through the same vast farm. It is mile after mile of fenced off monoculture, with the land being worked by huge machines that look like Transformers. This is partly how Brazil got to be the fifth largest economy in the world. But nestled between the fields of powerful agribusiness farms one finds a completely different Brazil.

The red flag of the The Landless Workers Movement (MST) welcomed us to the settlement. MST is the largest social movement in Latin America with over a million members. Like the 17th-century Diggers, they are squatters with attitude. Priced off the land and receiving no benefit from Brazil's supposed economic miracle, they find what land they can and occupy it, living communally and growing their own crops.

I cooked over a wood fire for 35 families. They said my farofa wasn't bad for a gringo. Fried onions and garlic, pork scratchings and cassava flour. We discussed the disgusting pesticides that the farm's aeroplanes spray over the settlement as a way of getting them to move on. The MST insists that the death of a two-year-old boy from the camp was a direct result of exposure to these chemicals. And the institutional churches do little to help. Yet a rough painting of Christ stood guard at the entrance of the next MST settlement we visited. And a quote from Matthew's gospel: "I will be with you to the end of time." As we left, one of the workers made an impromptu speech quoting Brecht on dialectics and raised her fist in a defiant leftist salute. Here, Jesus and Marx walk hand in hand.

Liberation theology inspired the founding of the MST back in 1984, during the fall of the dictatorship. Indeed, even before liberation theology found its name, it was the influence of the Catholic church's teaching that land distribution must have a social function which spooked the powerful Brazilian landowners who backed the military coup against communism in 1964. But with some heroic exceptions, the mainstream churches have given up the struggle of the social gospel in favour of a feel-good theology that brings in the punters. But even without institutional support, liberation theology remains alive and well in the settlements of the countryside and city favelas. What they need to do now is remind the churches of their own teaching: "I come to bring good news to the poor and freedom to the captive."